Global Corporations are Key for the Success of the Israeli Ecosystem
An “army” of over 40,000 thousand people is hunting innovation in Israel. Our new research reveals that 155 multinationals are active in Israel with one or more innovation outposts.
The reasons for such a presence are easy to explain if we look at the numbers the Israeli innovation ecosystem has been able to produce over 1,600 scaleups able to cumulatively raise $39B+. That equals to 18.4 scaleups every 100,000 inhabitants. Excluding Silicon Valley, there are no other places in the world with such a high Scaleup Density. Similarly, the Scaleup Investing Ratio (capital raised compared to GDP) is the second highest in the world. That means Israel is increasingly stepping up in maturity as shown by the number of Scalers (i.e. tech companies able to raise $100M+). The next goal for Israel is producing Tech Giants, at least in terms of capital raised (currently there are no Super Scalers).
The role of global corporations is key for the success of the Israeli ecosystem. Global companies have been operating in Israel for decades, mostly through an R&D approach. During the last few years, we have seen a strong shift towards a leaner approach and the use of open innovation mechanisms. More companies are increasingly experimenting with different partnership models, making innovation more cost efficient. This trend is similar to what we have been observing since 2010 in Silicon Valley.
That said, Israeli innovation outposts remain on average larger in size compared to the ones in Silicon Valley where, despite a broader presence, the overall number of innovation executives is 30% lower. This confirms that innovation outposts in Israel have a more research/co-development approach, while the reason d’etre of the presence in Silicon Valley is more transactional (investments and M&A). As a consequence the volume of CVC deals in the Bay Area is higher by an order of magnitude.
One out of two corporates with an outpost in Israel are from the US (79 out of 155), clearly showing the strong connection between the two countries around innovation practices. Europe (with 50 companies, 32%) and APAC (23 companies, 15%) do follow with German and Japanese companies leading the pack. Still limited, although on the rise, is the presence of China (4%). Electronics and IT & Software are at the core of corporate outposts in Israel, versus Automotive, Telecommunications and Finance in Silicon Valley.